Japan recorded a trade deficit for the third consecutive fiscal year, totaling 5.89 trillion yen ($38 billion) for the year ending in March. The weak yen and rising costs of energy and imports contributed to this deficit, with the biggest trade deficits seen in the Middle East, Australia, and Indonesia. However, Japan maintained a trade surplus with the U.S. and some European countries.
Despite a slight decline in annual exports to China, recent data shows a 12% growth in exports to China, driven by strong technology-related exports. Robert Carnell, regional head of research Asia-Pacific at ING Economics, predicts that exports will be the main engine for growth in the coming months.
The recent depreciation of the Japanese yen impacted the trade balance, making imports more expensive and boosting the value of exports. In March, Japan marked a trade surplus of 366.5 billion yen ($2.4 billion) as exports grew 7% and imports declined nearly 5%. Exports to the U.S. saw a growth of over 8% in March.
The trade deficit in fiscal 2023 was smaller compared to the previous year, which was heavily impacted by the war in Ukraine and soaring energy prices. Japan had a trade surplus in fiscal 2020, and the challenges posed by the pandemic on securing parts, including computer chips, have gradually eased.
Overall, Japan imported food while exporting autos, auto parts, and electrical machinery. Inbound tourism, which is booming, is also considered an export. Despite the challenges, Japan remains optimistic about the growth potential of its exports in the coming months.